Battery energy storage systems (BESS) are continuing to show strong growth despite a change of energy policy at the Federal level and a recent high-profile fire at a large California facility. In 2024, the U.S. added 10.4 GW of battery storage capacity, taking second place in overall capacity after solar. That takes cumulative utility-scale battery storage capacity to more than 26 GW as of the end of 2024, according to the U.S. Energy Information Administration (EIA).
That said, batteries still only represent 2% of the 1,230 GW of utility-scale electricity generating capacity in the nation. But with a projected 18.2 GW more BESS being added in 2025, the technology is on a steep, upward trajectory.
Globally, battery storage investment topped $450 billion in 2024. BESS capacity surpassed 55.7 GW in the first six months of 2025, with China and the U.S. leading the way. Last year, China added 37 GW of BESS for a total of 62 GW.
BESS was originally conceived as a solution to the eternal solar and wind energy dilemma – producing too much power when it isn’t needed and not enough when it is. Batteries stored energy produced by renewables during off-peak hours so it could be used during peak periods.
That application remains very much in play. But additional use cases are emerging. Sean Jones, Business Development Manager at Tesla, said BESS is now finding favor among data centers for power load smoothing, to accelerate speed to power while other sources of power are under development, and for emissions-free backup power.
“BESS can smooth out the power that AI training relies upon and smooth out ramp rates to meet utility requirements,” said Jones.
Tesla is going all in on utility-scale BESS courtesy of its Megapack technology. Operating in over 65 countries, Megapack already supplies 36 GWh globally at 99.3% uptime. Each unit ships fully assembled with a built-in foundation and integrated wireways, reducing installation costs by 25%. Its flexible configuration allows for faster installation. It is designed as a single, vertically integrated system with hardware and controls that reduce fire risk.
The company has been gearing up for mass production. Its Megafactories in Lathrop, California and Shanghai, China are among the largest industrial battery manufacturing facilities in the world. Together, they have a total manufacturing capacity of 80 GWh, or 20,000 units, per year.
As anyone who drives a Tesla vehicle would expect, the software is a key part of the value proposition. Megapack is equipped with software that maximizes system storage performance and minimizes risk while increasing revenue potential over time. It is designed to constantly improve through over-the-air updates and hardware-in-loop testing.
AI Driver
AI is a big driver for Tesla’s involvement in batteries. Back in 2024, Elon Musk visited his xAI data center in Memphis and said this:
“We are having some power fluctuation issues; when you do synchronized training, it’s like having an orchestra and it can go loud to quiet very quickly at the sub-second level. The electrical systems freak out about that – with 10-20 MW shifts several times per second.”
Power demand fluctuations ranging from 10% to 100% capacity can cause generator oscillations well beyond the specifications of onsite generators. On the grid, these kinds of sudden changes cause voltage flicker and frequency fluctuations. Traditional electrical solutions measure loads every two seconds. Tesla has figured out how to measure it over milliseconds and how to even it out so there is no grid disruption, while serving AI with high quality power.
“Power from a generator is highly variable but generator controls are usually far too slow to compensate accurately for power variability,” said Jones. “Connecting Megapacks in parallel to the load helps reduce variability and improves grid reliability and power quality. It can also be used to detect mechanical issues like bearing displacement that can lead to serious equipment damage.”
These Megapacks also address low voltage right through (LVRT), which is becoming especially important as more AI data centers grow in capacity. Example: In July of 2024, the Dominion Energy grid in the Washington DC area lost 1.5 GW of load across 60 data centers due to a minor fault that caused these facilities to switch to their backup generators. It is extremely challenging for grid operators to manage load drops at this scale. It leads to severe drops in frequency. Yet such events are happening again and again as AI workloads become more prevalent.
“BESS can mimic load, enabling adherence to LVRT grid codes,” said Jones. “The Megapack helps the utility load to stay constant.”
Perhaps the main feature driving Megapack popularity is speed. Data centers in the nation’s capital face a seven-year wait for a utility hookup. On top of that, there are supply chain crunches on key components.
“Load interconnection timelines have driven increased interest about off-grid microgrid systems such as the Megapack,” said Jones. “As much as 10% of U.S. peak load can be unlocked by curtailing 0.25% of peak load by one to two hours using battery energy.”
